UAE Law and Practice Contributed by: Raghad Hammad and Huda Al Zein, BLK Partners
Insurer conduct failures If an insurer fails to ask clear and specific questions at placement, or relies on vague proposal forms, regula- tors and dispute bodies are generally reluctant to allow the insurer to rely on non-disclosure as a defence. Separately, failures of this nature may expose insurers to regulatory sanctions for breaches of market-con- duct and consumer-protection requirements under the CBUAE framework. UAE Financial Free Zones (DIFC and ADGM) DIFC Insurance contracts in the DIFC are governed by common-law principles under DIFC law. Material non-disclosure or misrepresentation may entitle the insurer to avoid the contract ab initio, provided the undisclosed matter would have influenced the judge- ment of a prudent insurer. Remedies depend on the nature of the breach and the terms of the contract, with fraudulent misrepresentation giving rise to avoid- ance and potential damages. ADGM In the ADGM, English common law applies unless displaced by local legislation. Recent regulatory and consumer-protection developments have reinforced a distinction between deliberate and non-deliberate misrepresentation, particularly in consumer contexts. While avoidance remains available in cases of fraud, ADGM Courts may, depending on the circumstances, favour adjustment of contractual remedies (such as variation or proportionate outcomes) where non-dis- closure was careless rather than intentional. These outcomes are discretionary and assessed on a case- by-case basis. 6.3 Intermediary Involvement in an Insurance Contract UAE (Onshore) In onshore UAE, an intermediary is generally taken to act for the party that appointed it, based on its licence and mandate. In practice, an insurance broker usu- ally acts for the customer (the insured) by approach- ing insurers and arranging cover, while an insurance agent typically acts for the insurer it represents. Under the CBUAE framework, intermediaries are expected to deal fairly and professionally, provide clear and accurate information (and not mislead customers),
both parties must act honestly and fairly, including in disclosure. For the ADGM, recent consumer protection reforms align more closely with international practice. Con- sumers are generally not required to volunteer infor- mation unless asked, and the focus is on fair question- ing by insurers. 6.2 Failure to Comply With Obligations of an Insurance Contract UAE (Onshore) Under the UAE Civil Code and the federal insurance regulatory framework, the consequences of non-dis- closure or misrepresentation depend on whether the breach was intentional or unintentional. Intentional non-disclosure or misrepresentation (bad faith) Where the insured deliberately conceals or misrep- resents material information, the insurer is entitled to avoid (rescind) the insurance contract. In cases of proven bad faith, courts may allow the insurer to retain the premium, reflecting the insured’s misconduct. Unintentional or innocent non-disclosure Where the non-disclosure is material but not delib- erate (for example, arising from misunderstanding or an unclear question), the insurer may be entitled to avoid the contract, but the premium must generally be returned, in whole or in part, depending on the circumstances. In practice, UAE courts interpret such situations restrictively in favour of insureds, particu- larly in consumer and SME cases. Consumer protection and proportional outcomes For consumer and SME insurance disputes, com- plaints must first be referred to Sanadak, the insur- ance ombudsman. In practice, where a non-disclosed fact would have affected the pricing of the risk rather than its acceptability, Sanadak has, in some cases, favoured proportionate outcomes rather than total avoidance. This reflects an emphasis on fairness and consumer protection, although such remedies are not expressly codified and depend on the facts of each case.
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